Food Folk Danmark ApS Falkoner Alle 20 2000 Frederiksberg VR no. 24 21 40 87 Annual report 2018 ‘The financial statements were presented and adopted at the Companys annual general meeting (on 22 March 2019 pel. jl pleat tia as vContents ‘Statement by the Board of Directors and the Executive Board Independent auettors report Management’ review ‘Company detaits Financial highlights Operating review Food Folk Corporate Socal Responsibifty ‘Financial statements forthe financial year ended December 31, 2018 Statement of profit or loss and other comprehensive income Statement of financial postion Statement of changes in equity Statement of cash flows Basis of preparation ‘Significant accounting policies Notes Page 2‘Statement by the Board of Directors and the Executive Board “The Board of Directors and the Executive Board have today discussed and approved the annual report of Food Folk Danmark ‘ApS forthe nancial year 1 January ~ 31 December 2018. “The annual report has been prepared in accordance with the International nancial Reporting Standards as adopted by the EU and adaitional requirements in the Danish Financial Statements Act. In our opinion, the financial statements give a true and far view of the Company’s assets, lables and financial postion at ‘31 December 2018 and ofthe results ofthe Company's operations and cash flows fr the financial year 1 January ~ 31 December 2018, Further, In our opinion, the Management's review glves a flr review of the development in the Company/s activities and Financial matters, ofthe results forthe year and of the Company's financial position, ‘We recommend the annual report to be approved atthe annual general meeting (Copenhagen, 22 March 2019 Executive board: A. fm Berard Kn L/L fim Berard Kaudsen rman Board of cirectors: PagesPMG! Independent auditor's report ‘To the shareholders of Food Folk Danmark ApS pinion {In our opinion, the financial statements gve a true and far view ofthe Company's assets, lables and financial postion at 31 December 2018 and of te results of the Company/s operation and cash lows forthe financial year 3 January ~ 31 December 2018 in accordance with the International Financial Reporting Standards as adopted by the EU and additional requirements in the Danish Financial Statements Act ‘Aucited franco statemants Food Folk Danmark ApS' financial statements for the financial year 1 January ~ 31 December 2038 comprise the Income statement, statement of comprehensive Income, balance sheet, statement of changes inequity, statement of cashflows and fotes, Including summary of significant accounting polices (the financial statements). The fnancal statements are prepared In ‘accordance withthe Intemational Financial Reporting Standards as adopted by the EU and addtional requlrements inthe Danish Financial Statements Act. Basis for opinion ‘We conducted our uel n accordance with Intemational Standords on Auditing (ISAs) and the adtonal requirements applicable in Denmark. ‘Our responsibites under those standards and requlrements are further described Inthe *Audtr's responsibilities forthe aut of ‘the financial statements" section of our report. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basls for our opinion. {Independence ‘We are independent ofthe Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (JESBA Cade) and the addtonal requirements appicable n Denmark, and we have fuifiled ou other ethical responstblites in accordance with these rules and requirements. Statement on the Management's review Management Is responsible for the Management's review. ‘Our opinion onthe francialstatevents doesnot cover the Managements review, and we do nat express any form of assurance ‘conclusion thereon, In connection with our audit ofthe financial statements, our responsibilty Isto read the Management's review and, in doing so, consider whether the Management's review Is mately Inconsistant with the fhancial statements or our knowledge obtained during the auc, or otherwise appears tobe materaly misstated. Moreover, tts our responsiblity to consider whether the Management’ review provides the Information required under the Danish Fancial Statements Act Based on the work we have performed, we conclude that the Managements review isn accordance withthe Financial statements and has been prepared in accordance with the requirements ofthe Danish Financial Statement Act. We did nat ident any ‘material misstatement of the Managements review. ‘Management's responsibility for the financial statements Management is responsible forthe preparation of fhanctal statements that give a true and fir view in accordance withthe International Financial Reporting Standards as adopted by the EU and additonal requirements in the Danish Financial Statements ‘Act and for such internal control that Management determines Is necessary to enable the preparation of financial statements that are fre from material misstatement, whether due to fraud or eer. {In preparing the nancial statements, Management Is responsible for assessing the Companys abitty to continue asa going concer, disclosing, as applicable, matters related to going concern and using the going concem basis of accounting unless Management ether intends toiquldate the Company or to cease operations, or has no realistic alternative but to do so, Page 6kPinG! Independent auditor's report (continued) ‘Auditor's responsibilities for the audit of the financial statements (Our objectives are to obtain reasonable assurance as to whether the financial statements as @ whole are free from material misstatement, whether cue to fraud or error, and to issue an auditor's report that includes our opinion, Reasonable assurance is. 2 high level of assurance but isnot @ guarantee that an audit conducted in accordance with ISAs and the addtional requirements applicable in Denmark will aways detect a material misstatement when it exists. Misstatements may arse from fraud or error and are considered material, individualy or in the aggregate, they could reasonably be expected to influence the economic ‘decisions of users taken on the basis of these financial statements. ‘As part of an audit conducted in accordance with ISAs and the additonal requirements applicable in Denmark, we exercise Professional judgement and maintain professional scepticism throughout the aud. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain aut evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion, forgery, intentional omissions, mistepresentations or the override of internal control. = obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the Company's internal contr — evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management, — conclude on the appropriateness of Management's use ofthe going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ‘Company's abilty to continue as a going concem. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are Inadequate, to ‘modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern — evaluate the overall presentation, structure and contents of the financial statements, including the disclosures, and whether the financial statements represent the underying transactions and events in a manner that gives a true and fair view. ‘We communicate with those charged with governance regarding, among other matters, the planned scope and timing ofthe audit and significant aut findings, including any significant deficiencies in internal control that we identity during our audit. Copenagen, 22 March 2019 kpmG Statsautoriseret Revisionspartnerselskab VR no, 25 57 81 98 tell? Nels Vendetbo ‘State Authorised Public Accountant MINE no, 34532 Pages‘Management's review ‘Company details, General Food Folk Danmark ApS Falkoner Alle 20 2000 Frederiksberg Telephone: +45 33 26 60 00 Website: ‘www. medonalds dk E-mail nck, med.com WR no. 24.21.4087 Established: 30 December 1982 Registered office: Falkoner Alle 20, DK-2000 Frederiksberg Financial year: From 1 January to 31 December Board of Directors Joachim Bernhard Knudsen Managing Director Joachim Bernhard Knudsen ‘Auditor KPMG. ‘Statsautooriseret revisionspartnerselskab Dampfaergeve} 28 2100 Copenhagen Annual gener 1 meeting “The annval general meeting will be held on 22 March 2019, Page 6Management's review (continued) Financial highlights (pxKoo0. 2B To 2016 2 OF] (Ker figures [Revenue FSH SVT FATE TAIT 307 557] [Operating prott 156 422 123129 159327 113.945 112 892] Inet financials (2725) (18032) 09) (204) (226) Profit for the year 103 523 82293, 124513, 87 545 85 608] [Balance sheet totar T3658 1437751 «21481549 909 049 915 670] Investments in property, plant and equipment 13.851 1814 34344 47394 58 077| Equity 529 730 584207 1153 589 792827 788 282 Financial ratios. Return on assets Tit 56 ie 15 Ta] lEquty ratio 38,4 385 806 87.2 86,1 JReturn on equity 191 96 128 ua u3| [Average number of ful-time employees: 7 st 134 303 481] * Financial highlights for the comparison years have not been translated to IFRS. *** Revenues for 2017 and 2018 have been adjusted to reflect the impact from IFRSIS introduced in 2018. Financial ratios are calculated in accordance with the Danish Society of Financial Analysts’ guidelines on the calculation of financial ratios *Recommendations and Ratios". The financial ratios have been calculated as follows: Return on assets Equity ratio Return on equity Profit/loss from ordinary activities x 100 Average assets Closing equity x 100 Equity & labilities at year profit/loss for the year x 100 ‘Average equity Page?Management's review (continued) Operating review Principals activities “The main activity of the company isto acquite realestate by leasing or buying it, renovating and fiting it forthe purpose of ‘operating a McDonald's restaurant under a master franchise agreement made with McDonald's Corporation, the holder of the MeDonald's global trademark. Food Folk Danmark ApS (former name McDonald's Danmark ApS) was previously 100% owned by McD Europe Ltd, a wholly owned subsidy of McDonald's Corporation, but was acquired by Food Folk Danmark Holdings ApS (on 31/3-2017, By the end of 2018, Food Folk had 88 licensed McDonald's restaurants in Denmark, all operated by 21 independent franchisees ‘on contract for the operation ofthe individual restaurants fora period of up to 20 years. The total number of McDonald's restaurants was unchanged compared to 2017. Unusual circumstances To the management's knowledge, no unusual circumstances has occurred during 2018. Events after the balance sheet date No events have occurred after the balance sheet date that could signiticanty affect the Company's financial postion. Development: Profit/loss for the year (including comparison with forecasts previously announced) During 2018, the McDonald's restaurants in Denmark increased system wide sale* by 7.5 % (2017: 5,3%) “The Company realized a revenue increase of +9% compared to the previous year (2017: -15%), mainly driven by a combination of increased System Wide Sales and franchised income from refranchised restaurants. ‘activities and financial position Operating profit forthe year increased by DKK 33,293 thousand to DKK 156,422 thousand (2017: DKK 123,129 thousand) which corresponds to a increase of 2796, The increase in operating income is primarily driven by higher sales whereas ‘operating expenses are in line with last year. “The result of the year increased by DKK 21,230 thousand to a total of DKK 103,523 thousand (2017: DKK 82,293 thousand), which corresponds to a increase of 26%. “The management of the Company finds the result of the year satisfying. ‘+= system wide sales reflect the accumulated turnover in all McDonald's restaurants in Denmark, Outlook In 2019, the Company expects an increase in the system wide sales and operating profit. Particular risks “The Company does not have any significant risk apart from what is common from the industry since the majority of transactions is denominated in Danish Kroner, long term financing is secured with fixed interests and outstanding receivables are of short term nature, For further details on the Company's risk profile we refer to note 18. PagesManagement's review (continued) Food Folk Corporate Social Responsibility Food Folk Denmark's CSR strategy and initiatives Iti important to Food Folk Danmark to be a socially responsible company. We believe in being involved In the community in which we operate. We strive to engage in frank and honest dialogue with our guests and our employees, as well as our local ‘community about who we are and how our business is run. In addition, we always actin accordance with our seven values: We place the customer experience at the core ofall we do 3. We are committed to our people 3. We believe in the McDonalds system |. We operate our business ethically 5. We give back to our communities We grow our business proftably We strive to continually improve Food Folk Danmark is involved in numerous projects and initiatives regarding climate, human rights, environmental issues, ant- Corruption and bribery and social and sta matters and gender diversity. The CSR achievements are aggregated from the Company's 88 restaurants and the head office. Initiatives are decided in each area based on an overall cost/benefit evaluation. Thus, no area has a due dligence process or KPI's. However, projects are continuously evaluated and scaled up/down based on their effectiveness. (On climate, we risk having a raising carbon footprint during growth. However, our rebulld restaurants (72 aut of 88 restaurants), have succeeded in reducing food waste significantly, food, which has high carbon emission during production, ‘On human rights we could encounter minor issues with our code of conduct due to the large supply chain, which is why we ‘conduct thorough auciting via a third-party auditor. On environment we are aware that all companies have @ task in the green transkion, which is why we have implemented Rew packaging and contributed to counter itering in Denmark in several years including 2018. On anti-corruption and bribery, wee do not consider any risk in Denmark, due to the country’s rank as one of the world’s least corrupt countries. However, to be absolutely compliant with the high McDonald's standards, Food Folk Danmark follows the McDonald's Globat’s anti-corruption policy (read more on corporate. medonalds.com) (On social and staff matters, high turnover will always be a risk, as McDonald's brand is strong and valued on the Danish labour market. We thus attempt to strengthen and support our employees by providing extra benefits such as external education programs. Impact on climate We continuously aim to lessen our carbon footprint. Food production has a significant impact on climate change. This is why We aimed to lessen our food waste, when we rebuit 72 restaurants out of 88 in 2017/2018 - now redesigned to the new ‘made-to-order system. The impact i already visible. Our food waste is - for each rebult restaurant - approximately reduced by 25 pct,, as measured as cost pct. of turnover. {In order not to waste the valuable resources contained in food waste, grease, and cooking il, these waste materials are used in the production of biogas, ultimately resolving in a smaller carbon footprint forthe Danish society by displacing fossil fuels. Pages‘Management's review (continued) Food Folk Corporate Social Responsibility (continued) ‘Human rights ‘We cherish human rights and we believe we have one of the most diverse groups of employees. (Our suppliers are an important part of our business too. Thus, we aucit all our relevant suppliers through an independent auditor to ensure, that our partners comply with our code of conduct. Human rights is one of four core values that we audit, read more at link below under “Supplier code of conduct https//corporate.mcdonalds.com/corpmcd/scale-for-good/our- ‘people-and-communities/respecting-human-rights.html ‘A suppliers that Food Folk Danmark carries responsibilty for passed their audits in 2018. All global suppliers are connected to ‘one McDonald's market, who is responsible for their audting. Environment ‘We continuously evaluate our packaging and look for greener alternatives ~ to save on plastics, harmful waste, and CO2. In 2018, we implemented biodegradable tray mats and removed the plastic ids from McFlury - al this resulting in the following improvements: ‘Tray mats ~ Saving 42 tons of harmful chemical waste per year (implemented Q4 2017, effect from 2018) McFlury lids - Saving 13 tons of plastic every year Food Folk Danmark wishes to make a difference on litering too. In 2018 22 routes of litter collection were completed via the McDonald's sponsored Project ‘Clean Nature’ organized by the NGO Keep Denmark Clean. Following the success, the Company decided to raise the financial commitment in the project. Food Folk Danmark holds a seat in the board of the project and wil ‘monitor the project closely. In 2018 we continued our ‘one block policy’, entailing employees to collect iter in the immediate area surrounding each restaurant. The one block policy results in McDonald's staff continuously helping the local area keeping the streets clean not ‘only for McDonala's own liter, but also the society's general littering, Furthermore, Food Folk Danmark is continuing to work for animal welfare by focusing on cage eggs. In 2018, the Company laid the foundation for removing cage eggs completely from the ingredients lists, a process which will be completed in 2019. We already serve all our breakfast menu Items using free range, organic eggs. Anti-corruption and bribery All employees at the headquarter of Food Folk Danmark conduct a yearly elearning course on how to avoid corruption and bribery. Due to new ownership of the company the course was not performed in 2018 but was performed in 2017 and will be again in 2019. The e-learning is part of McDonald's global anti-corruption policy. For more information: https://corporate.medonalds.comy/corpmcd/investors-telations/codes-of-conduct ht Social and staff matters ‘Our employees form the core of our business. Thus, we measure employee satisfaction every year, and we aim to improve our scores every time. ‘To ensure our employees’ continued development and satisfaction, we offer a range of mandatory and optional educations. Furthermore, all our employees complete the mandatory McD-learning courses. ‘Our optional educations are created in collaboration with external academies in Denmark. Thus, we offer our employees @ tunique opportunity to combine work and education. In 2018, 197 employees were enrolled in one of our external education programs. Furthermore, Food Folk Danmark corporates closely with KLAPIob, which is part of LEV, an organization for people with cognitive disabilties. Since 2014, McDonald's has hired 48 people with cognitive disabilities. Gender diversity ‘At the management level, the gender ratio of managers are 54,3 pct. females and 45,7 pct. males. For the future, a similar split between genders is expected to be continued. “The board consists of one male director. Page 10Statement of profit or joss and other comprehensive income kK‘000 Note 2018 2017 Revenue 1 414321 381 641 Other external expenses 3 (177319) (188 713) Depreciation and amortisation 89 (43.119) (36 279) Staff cost 4 (40 163) (33537) ‘Other operating income, net 2 2702 7 Total expenses (257899) (258 512) Operating profit or loss 156 422 123.129 Financial income 5 0 ant Financial expense 6 (22.725) (1 143) Net finance expenses (22.725) (18 032) ‘Share of profit of equity accounted investees, net of tax 10 2) (94) Profit or loss before tax 133 625, 105 003, Tax for the year 7 (30 102) (22710) Profit or loss 82293 Attributable to Dividend to shareholders o ‘90 000 Reserves 103 523 7707) Profit or loss 103 523 82293 ‘Statement of comprehensive income Profit or loss 103 523 82.293 ‘Other comprehensive income for the year, net of income tax 0 o ‘Comprehensive income for the year 103 523, 82.293 Page 11‘Statement of financial position at 31 December DkK‘000 Assets Non current assets Property, plant and equipment Intangible assets Investments in associates Deferred tax assets Current assets ‘Trade and other receivables Receivables from related parties, Tax receivable Restricted cash Cash and cash equivalents Equity attributable to equity holders of the parent Share capital Proposed dividends Retained earings Total equity ‘Non current liabilities Other interest-bearing loans and borrowings. Provisions Deferred tax liabilities Current liabilities (Other interest-bearing loans and borrowings ‘Trade and other payables Payables to related parties ‘Tax payable Provisions ‘Total liabilities ‘Total equity and liabilities 10 n 2 2 13 13 4 4 15 16 n 15 "7 2 16 2018 1.227 221, 7689 140 0 1.235 050 4773 69 095 0 ° 0 1378 918 30.000 499 730, 529 730 542719 18 821 157 545 719 085 25.890 102 694 774 245 500 130 103, 849 188 1378 918 2017 1.258 548 8 125 202 o 1266 875 71.688 0 1450 52192 45.546 170.876 1.437 751 30 000 90 000 434 207 554 207 568 608 32103 158 980 759 694, 393 544 1437 751, Page 12ereseg veers Dezeee 7 Wooster) — Tou se) — tooo oes wow ooo | (000 06) o (000 06) wer eer — 3 ECT weer 5 oz ss az vee 000 06 . sbuyuie9 spuepiNP fame tered power osodoid ‘Woress Zoe bev 00006 (ists) (ase eer) ‘Tooo az) wee 7 0 ° 0 (000 02) tere wa ‘000 06 tree BD we 69s est T ze ses (000 02 rn sbuywses spuspiaip fambo tee, pourerey pesodoid °) Teudes aueus ‘W00 0F Was) a (ais cz») ° 0 v £18 40s eaideo oseys, STOz soquiaseg Te ye souR|eR ‘SroUMO 0} suoRNaLRSip pue Aq SuoANG}UGD [e101 upp wLEIUT spuapnig :Aynba ws ARDaup papiooas ‘SIOUMO YM SuORDeSUEL, oyad auf 403 wou anisuousidusoo 1220, $80) 30 yodd 102 Axenuer T ye apuejeg 003010 £107 soquisced Te ye souereg S1ouMo 0} suoRNGLRSIp pue Aq suoANqiuED }eI0, spuapina :Aynba ur Agpaup papuooas ‘SiO UMO (gh SUORDESUEL| ouied sip 403 owoou anysuaypidis0d (EVOL, $80] 10 ols hoz Asenuer 5 3e soueres ‘00020 Aqinba uy seBueyp yo quowsyeygStatement of cash flows xK'000 Cash flow from operating activities Profit for the year ‘Adjustments for: Depreciation, amortisation and impairment Financial income Financial expense ‘Share of profit of equity accounted investees, net of tax. (Goin)loss on sale of property, plant and equipment Taxation Decrease/increase in trade and other receivables Decrease/increase in trade and other payables Decrease/increase in related parties balances Decrease/increase in provisions Tax paid Net cash from operating activities Proceeds from sale of property, plant and equipment ‘Acquistion of property plant and equipment ‘Acquistion of intangible assets Net cash from investing activities Cash flows from financing activities Proceeds from the issue of share capital Proceeds from new loan ‘Change in restricted cash Change in cash-pooling balances Interest paid Financing transaction cost Repayment of borrowings Dividends paid Net cash from financing activities Net increase/decrease in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange fluctuations on cash held Cash and cash equivalents at 31 December Note 2018 103 523 ono ° ns n 7) 30102 95761 2 (3.095) 7 8359 2 3.675) 16 (13.132) (21543) (30.800) (30800) 156 941 8 4.000 8 (13.851) (1.248) (11.099) 4 ° 24 0 B 52192 2 (68 635) (20.966) 0 m4 (26 937) 4 (327 042) (191 388) (45 546) 45 546 0 3 o (458 031 2017 82293 36.279 au) 18143 4 ) 2710 77.098 14625 71a (6215) 17262 32813 (30 146) (30146) 162 058 5447 (5594) 3.800) (3947) (477817) 632 288, (52 192) 0 (16 883) (19 611) (49 965) (203 858) B 45.362 au 45 546 Page 14Basis of preparation Reporting entity Food Folk Danmark ApS isa limite lability company domiciled in Denmark “The financial statements forthe period 31 December 2017 and 31 December 2018 comprise the financial statements for Food Folk Danmark ApS. ‘The Company's main activity consists of acquiring realestate by renting or buying It, renovating and fing it forthe purpose of ‘operating a McDonald's restaurant under a master franchise agreement made with MeDonala's Corporation (hereafter referred to ‘as McDonal!’s), the holder of the McDonalds global trademark ‘The Board of Directors and the Managing Director discussed and approved the Financial Statements for 2018 of Food Folk Danmark ApS on 22 March 2019, ‘Accounting policies ‘The Company has consistent applied the folowing accounting polices to all periods presented in these financial statements. Functional and presentation currency “The financial statements are presented in OKK rounded to the nearest OKK 1,000, Basis of accounting ‘The financial statements forthe year ended 31 December 2018 have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), and additional requirements in the Danish Financial Statements Act ‘This is the first set of financial statements In which IFRS 15 Revenue from Contracts with Customers has been adopted. ‘Changes to significant accounting policies are described below. Details ofthe accounting polices are included below, ‘Changes in significant accounting policies ‘The Company has initially applied IFRS 15 Revenue from Contracts with Customers from 1 January 2018, No other new standards, also effective from 1 January 2018, have been implemmeted and amendments to existing standards did not have @ ‘material effect on the Company's financial statements. Due tothe transition methods chosen by the Company in applying these standards, comparative information has been restated to reflect the requirements of the new standards, however there are no effects on the statements of financial position. ‘The effect of intially applying the standard is mainly attributed to changes in the presentation of revenues and costs cue to an ‘analysis of if the Company is acting as principal, or agent, based on the identified performance obligations. Adoption of IFRS 15 — Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue fs recognized, It replaced IAS 18 Revenue, IAS 11 Constructions Contracts and related interpretations. Under IFRS 15, revenue is recognised ‘when a customer obtains control of the goods or services. Determining the timing of the transfer of control - ata point in time ‘oF overtime as well as the agent and principal characteristics - requires judgement. ‘The Company has adopted IFRS 15 using the retrospective method (without practical expedients). Accordingly, the impacts in the statement of profit or loss are disclosed below. There are no effects on the statements of financial position. ‘The folowing tables summarise the impacts of adopting IFRS 15 on the Company/s statement of profit or loss forthe year ended 31 December 2018 and 2017 for each of the line tems affected. There was not material impact on the Company's statement of cash flows for the years ended 31 December 2018 and 2017. Page 15Basis of preparation (cones) Adoption of TERS 15 — Revenue from Contracts with Customers (continued) Impact on the statement of profit or loss For the year ended 31 December 2018 As Adjustments Amounts kK'000 reported without ‘adoption of TFRS 15 Continuing operations Revenue 414321 (123.842) 290479 (Other external expenses (177319) 123842_——(53.477) Total 702 87 00D For the year ended 31 December 2017 As Adjustments Amounts kK’900 reported without adoption of TRS 15 Continuing operations Revenue 3eL641 (115876) 265765 Other external expenses (18.713) 115876 (72.837 Total 192928 z 192928 Under IAS 18, revenue related to the royalties due to McDonald's, as well as out-of-pocket expenses, were recognized net in the financial statements. In accordance with IFRS 15, Food Folk is acting as principal in rendering the services therefore the related ‘amounts are being recognized gross in the statements of profit or loss. ‘Standards issued but not yet effective “The IASB has issued a number of new or amended accounting standards and interpretations effective for annual periods beginning after 1 January 2018, The approved, though not yet effective, standards and TFRICs willbe applied as they become mandatory for the Company. Of those standards that are not yet effective, IFRS 16 is expected to have a material impact on the Company’ financial statements inthe period of intial application. IFRS 16 - Leases “The Company is required to adopt IFRS 16 Leases from 1 January 2019, The Company has assessed the estimated impact that intial application of IFRS 16 will have on its financial statements, as described below. The actual impacts of adopting the standard on 1 Janvary 2019 may change because: — the Company has not finalised the implementation, testing and assessment of controls over its new IT systems; and — the impact of the new accounting policies are subject to change until the Company presents it first financial statements that Include the date of intial application. IFRS 16 introduces a single, on-balance sheet lease accounting madel for lessees. A lessee recognises aright-f-use asset representing its right to use the underlying asset and a lease labilty representing ts obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value ites. Lessor accounting remains similar to the current standard - Le. lessors continue to classify leases as finance or operating leases. IFRS 16 replaces existing leases guidance, incuding IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains @ Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions InvoWving the Legal Form of @ Lease. | Leases in which the Company is 2 lessee ‘The Company will recagnise new assets and labilties fr its operating leases of i's properties (see note 19).The nature of ‘expenses related to those leases will now change because the Company wil recognise a deprecation charge for ight-oF-use assets and interest expense on lease liabilities. Previously, the Company recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and lablties only to the extent that there was a timing ifference between actual lease payments and the expense recognised, In addition, the Company wil no longer recognise provisions for operating leases that It assesses to be onerous as described in rote 16. Instead, the Company wil include the payments due under the lease in its lease liability No significant impact is expected forthe Company's finance leases. Based on the information currently avallable, the Company estimates that it will recognise a Right-of-Use of asset and an Additional lease liabilities in a range of DKK 330-360 milions as at 1 January 2019. The Company does not expect the adoption Of IFRS 16 to impact ts ability to comply with the loan covenant, described in note 18. Page 16Basis of preparation (cantnuss) IFRS 16 - Leases (continued) I. Leases in which the Company isa lessor ‘The Company will reassess the classification of subvleases in which the Company is a lessor. Based on te information currently available, the Company expects that its sub-lease will cantinve to be classified as operating leases, therefore no signficant impacts expected in the nancial statements as at 1 January 2019. 1, Transition ‘The Company plans to apply IFRS 16 initaly on 1 January 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognised as adjustment tothe opening balance of retained earnings at 1 January 2019, with no restatement of comparative information. ‘The Company plans to apply the practical expedient to grandfather the definition ofa lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with IAS 17 and IFRIC 4 Use of judgements and estimates |In preparing the financial statements, Management has made judgements, estimates and assumptions that affect how the CCompany’s accounting polices are applied and the amount of assets, labile, Income and expenses reported, The actual results may deviate from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to estimates are recognised prospectively, Judgements. ‘The following provides information about judgements made in applying those accounting polices that most significartly impact the amounts recognised in the financial statements: Gross vs. net recognition of royalty income and out-of-pocket expenses Food Folk both receives royalty income from the sub-franchisees and pays royalty income to McDonald's. These amounts represent the fees for using the McDonald's brand and intellectual property. McDonald's has stipulated that Food Folk is require to charge its sub-franchisee a ied percentage of systemwide sales as 3 royaty expense. Based on the indicators in IFRS 15 management has assessed that Food Folk is acting as a principal (requiring royalty payments to be recognised gross). This is substantiated by the fact that Food Folk is responsible and bears the rsk that the sub- franchisees do not perform in accordance withthe license granted by McDonald's, being also primarily responsible for providing the services to the franchisees. Costs and fees (out-of-pocket expenses) related to leaseholds that ae used by subfranchisees are invoiced with no mark-up to the sub-franchisee, and recognised net of payments received from franchisees. Based on the indicators in IFRS 15 management has assessed that Food Folk is acting as an agent (requiring out-of pocket costs ‘to be recognised net). This is substantiated by the fact that other parties are primary responsibie for providing the services related to the out-of-pocket costs and that the price forthe services related to the out-of-pocket costs are not determined by Food Folk. Investment incentives Food Folk grants investment incentive to franchisees, by reducing the franchise fee fora certain period after investment. The incentive is recognised asa reduction of revenue as the discount is provided to the franchisee, Historical date shows that the Incentives offered are generally around 14% of systemwide sales. ‘Minimum lease term “The lease term has an impact on the accounting for = Loss making contracts — Restoration provisions — Straight-lining of lease expenses. ‘According to TAS 17 the lease term Includes the non-cancellabe period of the contract and any further periods for which the lessee has an option to continue to lease the asset and for which, atthe time of inception ofthe leas, iti judged reasonably certain thatthe lessee wil exercise that option. Food Folk has a 20-year agreement with McDonals requiring Food Folk to ensure that there is a certain number of restaurants In Denmark, and restaurants can only be closed if permission Is granted by McDonale's. Management has assessed that leases in general will be extended to 20 years. Consequenty, the minimum lease term used for accounting for the above listed items has ‘at a minimum been set to 20 years unless otherwise agreed with McDonald's. Page 17Basis of preparation (corned) ‘Assumptions and estimation uncertainties ‘When preparing the financial statements of the Compary, Management makes a number of accounting estates and assumptions on which the recognition and measurement of the Company’s assets and liabilities are based ‘The folioning provides information about assumptions and estimation uncertainties with a significant risk of resulting in 2 material adjustment in the year ending 31 December 2018: Impairment test intangible assets and property, plant and equipment When there isan indiation of impairment, an estimate is made of how the Company's individual cash-generating units will be able to generate sufficient positive net cashflows to Support the value of other net assets ofthe unit. Estimates of future cash flows many years in the future wll be subject to some degree of uncertainty. The key assumptions supporting recaverable ‘amounts mainly comprise discount ate (WACC) and expectations regarding future systemic sales in restaurants, Provisions Provision for onerous contracts and restoration provisions are determined based on the net present value of expected future cash flows. Estimates of future cash flows wil be subject to uncertainty. The key assumptions supporting the provisions are ‘expectations regarding future systemwide sales in restaurants, cost per square meter for restoring leaseholds and the discount rate used to calculate the present value of the future cash flows. Please refer to note 16 for more detals related to the provisions. Page 18Significant accounting policies ‘The financial statements have been prepared on a historical cost basis, except for derivative financial Instruments that have been measured at fal valu, Business combinations ‘The Company accounts for business combinations using the acquistion method when controls transferred to the Company. The consideration transferred in the acquistion is measured at far value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately “Transaction costs are expensed as incurred Foreign currency ‘Transactions in currencies other than the functional currency are foreign currency transactions, (n initial recognition, transactions denominated in foreign currencies are transiated into the functional currency atthe exchange rate prevailing atthe transaction date. Foreign currency translation adjustments made when such transactions are settled or as a result of translation of monetary items denominated in foreign currencies at year-end exchange rates are recognised in profit or loss under financial income or financial expenses. Foreign currency difference arising from the translation of certain items are recognised in OCI, Statement of profit or oss Revenues Food Folk has intially applied TERS 15 from 1 January 2018. Information about the Food Folk’s accounting policies relating to Contracts with customers and the effect of intially applying IFRS 15 is described in the section above Adoption of IFRS 15 ~ Revenue from Contracts with Customers, Revenue consist of sales of goods from restaurants, recognized in the statement of income Inthe point in time when the sales ‘occur, fees from franchised restaurants recognized over time, asthe customer simultaneously consumes and receives benefit from the services asthe service is performed, Franchise fees from franchised restaurants are based on a percent of sales realised by the franchised restaurant if they exceed a ‘minimum monthly amount and are recognised inthe period they are earned, Incentives granted to franchisees are calculated and recognized as part ofthe variable revenue forthe period. Revenue is presented net of discounts, rebates and incentives granted, Also, revenue is also presented net of VAT and other Initect taxes charged on behalf of third partes. Other operating income, net (Other operating income, net are secondary to the principal atvtes ofthe Company and include gains and losses on elsposal of intangible assets and propery, piant and equipment. ‘Raw materialsand consumables Raw materials and consumables include expenses relating to raw materials and consumables used in restaurant. Other external expenses Other external expenses include expenses relating to the entity's core activities, incuding expenses relating to advertising, ‘administration, premises, bad debts, royalties paid to McDonald's, changes to loss making contract provisions, et, ‘sof 31 December 2017 royalties paid to McDonald's were recognised net of royalty payments receved from franchisees, however withthe Implementation of IFRS 15- Revenue from Contracts with Customer, the revenue is being recognized grass. AS Per the new standards Food Folk acts as a principal in rendering the services rather than agent. Costs and fees related to leaseholds that are used by sub-franchisees are invoiced with no mark-up to the sub-franchisee, and recognised net of payments received from franchisees. According to the Franchise agreements the franchisees are required to ‘cover all costs related premises used as restaurants, such as common costs, marketing contributions, municipality fees and Property taxes. As Food Folk does not obtain control of the goods or the right to the servces, mare than momentary, in ‘advance of transferring those goods or services tothe franchisee, Food Folk acts as an agent rather than as a principal in ‘rendering the services. Payments made under operating leases are recognised in profit or loss on a straight-tine basis over the term of the lease. Lease incentives received are recognised as an integral pat ofthe total lease expense over the term of the ease. Page 19‘Significant accounting policies («renusi) Staff costs Staff costs include wages and salaries, including compensated absence and pensions, as well as other socal security Contribution, etc., made to the Company's employees. Staff costs are net of refunds made by public authorities. Short term employee benefts are expensed as the related service Is provided. A liabllty is recognised forthe amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount asa result of past service provided by the employee and the obligation can be estimated reliably. ‘Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is availabe, “Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefts and when the Company recognises costs fora restructuring. If benefits are not expected tobe settled fully within 12 months of the reporting date, then they are discounted, Financialincome and expenses Financial income and expenses comprise interest income and expense, fnancial costs regarding finance leases, gains and losses on securities, payables and transactions denominated in foreign currencies, amortisation of financial assets and lables as well as surcharges and refunds under the on-account tx scheme, et. Positive changes in the fair value of derivative nancial instruments not designated as hedging arrangements are aiso included. Financal expenses comprise interest, losses on transactions denominated in foreign currencies, amortisation of financial lables, indding finance lease commitments, and surcharges under the Danish tax prepayment scheme, et Negative changes in the fair value of derivative financial instruments not designated as hedging arrangements are also included, ‘Share of profitof equity accounted investees “The item includes the Company/s proportionate share of the profiyoss forthe year in equity accounted investees after ‘elimination of intza group gains or losses, impairment of goodwill and amortisation/depreciation of other excess values at the ‘ime of acquisition. Tax for the year Income tax expense comprises current and deferred tax. Its recognised in profit except to the extent that i elates to a business combination or items recognised drecty in equity or in OCI, Interest and penalties related to income taxes, including uncertain tax treatments, are accounted for under IAS 37 Provisions, ‘Contingent Liablties and Contingent Assets. ‘Statement of financial position Property, plant and equipment Items of property, plant and equipment are measured at cost which includes capltallsed borrowing costs, less accumulated depreciation and impairment loses. ‘The cost of certain items of property, plant and equipment at 1 January 2016, the Company's date of transition to IFRS, was determined with reference to its fir value at that date. Cost comprises the purchase price and any costs directly attributable to the acquisition untl the date when the asset is available for use. The cos of sef-constructed assets comprises direct and Indirect costs of materials, components, sub-suppliers, and ‘wages and salaries. The present value of estimated iablities related to restoring leaseholds is added to the cost of leasehold Improvements or buldings i the liablltes are proved for. Subsequent expenditure is capitalised only iis probable thatthe future economic benefits associated with the expenditure wil Flow to the Company. Where individual components ofan item of property, plant and equipment have diferent useful lives, they are accounted for as separate tems, which are depreciated separately Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values Using the straight-line method over their estimated useful lives, and is generally recognised in profit or los. Leased assets are depreciated over the shorter of the lease term and their useful ves unless its reasonably certain thatthe Company wil obtain. ‘ownership by the end ofthe lease term. Land is not depreciated. Page 20‘Significant accounting policies (omirucs) ‘The estimated usefl lives of property, plant and equipment for current and comparative periods are as follows: Buildings 40 years length of lease + options but Leasehold improvements maximized to 30 years Fixtures and fittings and equipment 310 years, \Where the residual value exceeds the carrying amount of the asset, no further depreciation charges are recognised. ‘The depreciation period and the residual value are determined atthe time of acquisition and are reassessed every year. {In case of changes in the amortisation period or the residual value, the effect on the deprecation charges is recognised prospectively as a change in accounting estimates. Gains and losses on the cisposal of items of property, plant and equipment are calculated asthe diference between the selling Drice less costs to sell and the carying amount at the date of dsposal. The gains or losses are recognised in the statement of. profit or loss as other operating income net. Intangibleassets Goodwill rising of acquisition of subsidiary or restaurant from franchisee Is measured at cost less accumulated impalement losses. Other intangible assets, inducing rights (key money), software licences that are acquited by the Company and have finite Useful lives are measured at cost less accumulated amortisaton and any accumulated impairment losses Subsequent expenditure is capitalised only when it increases the future economic benefits embodied inthe specific asset to hich it relates. Al other expenaiture, including expenditure on Internally generated goodwill and brands, i recognised in profit as incurred. ‘Since the period of amortisation is based on the assets expected useful if, no salvage value has been taken into account. ‘Amartisation is calculated to write off the cost of Intangible assets using the straight-line method over ther estimated useful lives, and is generally recognised in profit or loss. Goodwil is not amortised. The estimated useful Ives for current and comparative periods are as follows: Contractual rights 2-20 years ‘Software Hcenses 355 years Useful ives are reviewed at each reporting date and adjusted if appropriate. Gains and losses on the disposal of intangible assets are determined as the diference between the seling price less costs to sell {and the carrying amount atthe date of disposal. Gains or losses are recognised in the income statement as other operating activities, net Investments in associates ‘Associates are those entities in which the Company has significant influence, but not control or joint control, ever the financial ‘and operating polices. Interests in associates are accounted for using the equity method. The investments are initially recognised at cost, which Indudes transaction costs. The equity value consists of the Company's proportionate share ofthe entties' equity, adjusted for distributions plus goodwil and intra-group losses and less intra Group gains and gain on bargain purchase, if any. ‘Subsequent to intial recognition, the financial statements include the Company's share ofthe profit or loss and OCI of equity ‘accounted investees, until the date on which significant influence or control ceases. Investments in entities whose net asset value is negative are measured at DKK 0, The entity's proportionate share of @ deficit on equity if any, is set off against receivables from the investment in so far as the deficit is recoverable. Amounts in excess thereof are recognised under ‘Provisions’ in so far as the parent has a legal or constructive obligation to cover the deficit. Page 21Significant accounting policies (oninues) Impairment of non-financial assets [At each reporting date, the Company reviews the carrying amounts of Its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of Impairment. If any such indication exist, then the asset's recoverable amount is estimated. Goodwill s tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or Cash Generating Units (CGUS). Goodwill arising from 2 business combination i allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. ‘The recoverable amount of an asset or CGU is the greater of ts value in use and its fait value less costs to sell. Vale in use is based on the estimated future cash flows, ciscounted to their present value using a pre-tax discount rate that reflec current ‘market assessments ofthe time value of money and the risks specific tothe asset or CGU. [An impairment loss is recognised I the carrying amount ofan asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss under ‘Depreciation and amortisation’. They are allocated frst to reduce the catrying amount of any goodwil allocated tothe CGU, and then to reduce the carrying amounts ofthe other assets in the CGU ona pro rata basis, [An impairment loss in respect of goodwill isnot reversed. For other assets, an impairment lss is reversed only to the exten that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or ‘amortisation, if no impairment loss had been recognised, Inventories Tventories are measured atthe lower of cost and net realisabe value. The cost of inventories is based on the frst-in first-out principle. The cost of raw materials and consumables comprises the cost of acquisition plus delivery costs as well as other costs dlirecty attributable tothe acquisition. “The net realisabe valve of inventories is calculated as the sales amount less costs of completion and costs necessary to make the sale and is determined taking nto account marketability, obsolescence and development in expected selling rice Receivables Receivables are measured at amortised cost, which usually corresponds to the nominal value. Provisions are made for bad debts ‘on the bass of objective evidence that a receivable or a group of receivables are impaired. An impairment loss is calculated as the difference between an asse's carrying amount and the present value ofthe estimated future cash flows discounted at the asset's orginal effective interest rate. Prepayments Prepayments recognised under ‘Assets comprise prepaid expenses regarding subsequent financial reporting year. (Cash and cash equivalents Cash compeses cash balances and bank balances. Due to the nature of the scheme, balances in the Company's cash p00! scheme are not considered cash but are recognised under ‘Receivables from/Payables to related parties. Income tax and deferred tax CCurrent tax comprises the expected tax payable or receivable on the taxable income or loss forthe year and any adjustment to the tax payable or receivable in respect of previous years. The amount of curent tax payable or receivable is the best estimate ofthe tax amount expected to be pald or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted atthe reporting dat. Based on the llabllty method, provisions for deferred tax are calculated of all temporary differences between carrying amounts ‘and tax values, with the exception of temporary differences onthe initial recognition of assets or labiltes in transaction that is rot a business combination and that affects nether accounting nor taxable profit or loss and taxable temporary differences arising on the inital recognition of goodwil Deferred tax is measured atthe tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets are recognised atthe value at which they are expected to be utilized, either through ellmination agalnst tax on future earnings or through a set off against deferred tax Fablites within the same jurisdiction. Liabilities: Financial labities are initially measured at fair valueless any directly attributable transaction costs. Subsequent to initial recognition, these labilties are measured at amortised cost using the effective interest method. Borrowing costs including capital losses, are recognised as financing costs inthe income statement over the term ofthe loan. Other liabilities are measured at net realsable vale. Page 22‘Significant accounting policies (ontruss) Provisions Provisions are determined by discounting the expected future cash flaws ata pre-tax rate that reflects current market assessments ofthe time value of money and the rsks specfic tothe liabilty. The unwinding ofthe dscount is recognised as finance cost. ‘When the Company has a legal obligation to restore a leaseholdj/leased land, a provision is recognised corresponding to the present value of expected future costs. ‘A provision for onerous contracts is measured atthe present value ofthe lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any Impairment loss on the assets associated with that contract. Deferred income Deferred income recognised as a liabilty comprises payments received concerning income in subsequent financial reporting years. Leases Determining whether an arrangement contains 2 lease {At inception of an arrangement, the Company determines whether the arrangement is or contains @ lease. [At inception or on reassessment of an arrangement that contains a lease, the Company separates payments and other consideration required by the arrangement into those forthe lease and those forthe elements on the basis of their relative fair values. Ifthe Company conciudes fora finance lease that its impracticable to seperate the payments reliably, then an asset and a liaiity ae recognised at an amount equal tothe fair value ofthe underlying asset; subsequently, the lablly is reduced as payments are made and an imputed Finance costs on the liability is recognised using the Company's incremental borrowing rate. Classification of leases Leases of property, plant and equipment that transfer to the Company substantially all ofthe risks and rewards of ownership are Classified as finance leases. The leased assets are measured iiially at an amount equal to the lower oftheir fair value and the Present value of the minimum lease payments. Subsequent to inal recagntion, the assets are accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recngnised in the Companys statement of financial position. Lease payments Payments made under operating leases are recognised in profit or loss ona straight-line basis over the term ofthe lease, Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the ‘outstanding liablity. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest onthe remaining balance ofthe laity. Presentation of cash flow statement ‘The cash flow statement shows the Company's cash flows from operating, investment and financing activities for the year, the years changes in cash and cash equivalents as well as the Company's cash and cash equivalents atthe beginning ofthe year Cash flows from operating activites ae determined using the indrect method and stated as the profit for the year adjusted for ‘non-cash operating items, including depreciations and amertisations, gain on sale of property, plant and equipment, provisions ‘and changes in working capita, interest received and income tax pa, CCash flows from investing activities comprises payments connected with the purchase and sale of non-current asses, including property, plant and equipment Cash flows from financing activities include proceeds from loans and repayments on borrowings, interest and financing cost payments, capital reductions and dividends. Cash and cash equivalents consist of cash and short-term deposits with 2 maturty of three months or less and an insignificant risk of changing value. Page 23Notes 1 Revenue In the following table, revenue from contracts with customers is disaggregated by nature: xK000 2018 2017 Sub-franchisee income (fed) 141063 134900 Sub-franchisee income (variable) 273258 246 741 Total revenues Independent sub franchisees have under frenchise agreements the right to use McDonald's restaurants. The Franchise ‘agreements have been granted for @ period of up to 20 years from the date of Issue. The franchise agreements incude the following future minimum payments: okkc000 2018, 2017 Less than one year 12876 123978 Between one and five years amen 423.442 More than five years 1121874 __ 1061 423 Total leases as lessor 1721371 1.608793 2 Other operating income, net. kK000 2018 2017 Net gain on disposal of property, plant and equipment 257 7 Other income/expense 2445 0 ‘Total other operating income, net 2702 7 3. Other external expenses KK000 2018 2017 Royalties and other fees to McDonald's Corporation 122397114469 Lease expense 39578 36 661 Other expenses 15344 37 583 ‘Total other external expenses 177319 188713 Faes to auditors and other operating expenses Pursuant to section 96(3) ofthe Danish Financial Statements Act, fee paid tothe Company's auctor appointed at the general meeting has not been disclosed. 4 Staff cost okK:000 2018, 2017 Wages and salaries 36 765 30046 Social security costs 53 606 Contributions to defined contribution plans 2865 2.885 Total staff cost 40163 33537 ‘Average numberof fulltime employees 7 SL ‘Average number of key management personnel 1 1 Remuneration paid to Management in 2018 has been excluded from the financial statements with reference to section 980(3) ‘ofthe Danish Financial Statements Act Page 26Notes (continued) 5 Financial income kx000 2018 2017 Net foreign exchange gain o ann Total finance income 0 an 6 Financial expense kx000 2018 2017 Net foreign exchange loss 2 o Interest on financial labilties 21309 16 583 Interests on related partis lables 436 0 Unwinding of ciscounts 186 358 Other interest expense 782 1202 Total 22725 18143 7 Taxfor the year Recognised in the income statement «000 2018 2017 Curent year 31044 26173 ‘Adjustments for prior years 493 o Total current tax expense 31537 26173 Deferred tax expense Origination and reversal of ‘temporary differences (1435) _(3463) Total deferred tax expense (2435) _ (3.463) ‘Tax expense in income statement (excluding share of tax of equity accounted investees) 30 102 2710 Total tax expense 30102 22710 Recontillation of effective tax rate Profit or loss before tax 133625 105003 “Tax using the corporation tax rate in Denmark of 22% 29398 23.101 Non-deductible expenses a 84 ‘Tax exempt revenues o ° Under / (over) provided in prior years 493 (475) Total tax expense 30102 22710 Page 259 ae wer 76008 E99 ses eszt 0 @ Ss wea 0 0 ° ° suet 6 0 1T ob6 0 8196 162 85 695 997 T a) a6 vers =~=S~*~*« SOT ees 0 esr ses 96 ore ESE 9c ES Ede 997 t rere oponnsucs quowdinbo pue —squewaercudu sipping pue puey spun ‘SGuryy ‘soumxiy —poyeseey ‘Aaunoas a6e6 ou paseysi6a1 sey AuediueD aun ‘sueO| 2Be6 VOU [iQ J unowe Busieo w yy saRledoud ‘BT02 J2QUED0G TE IY Aunces et0z soquocea tev cr0z sequesed 1e3¥ ‘anyen 400939 ‘tox -oquiszeg Te ye aouejeg suonsintoe J2490 2102 Krenuee Te a2UE3 3509 0030 quouidinbe puequeld “Auodoug 8 (Panuquas) s230y| | °| west eaoT a6 9 o a _ 7 © © ° ° cot 6201 359 ° sie ste ° ° ae we a o wt a Ft ae sx ze 0 eur 0s et o ero. 280 ‘S614 femoeque mpoo wae ve08 wy a 3 wi wr 3 ever eet ° ° ove oe ° ° owe oe a ° wT ea 3 18s 2 18s ° wat ose 46 ° reo. s1n0 suousemzeU09 ympoO ‘e10z #2quiz09a te a £102 s9quis08q te ‘anjen 4ooq 39 ‘soz soquiaped Te ye soue|eg ete amnet peer £107 sequiooea Te 3 souereg ssodsig 42804 34 J0} vonesioUy £10 Kenwer 1 ye sve awounjeduy pue uonespiowy 0030 ‘8t0z soquiszed Te 18 soueles sues aseypind Ajewsapx — suonisnhoe Jeu, 8102 Aenuer te 2ouereg 2807 sequieoea Te 32 souereg sesodsig paseipind Ajewapx — suogsintoe 59490 ‘G07 ener + 3e aouereg 3809 00300 sqosse ajqiSueut § (poruqucs) sen0yNotes (continued) 10 aa 2 Investments in associates Other Total Investment in comprehen- comprehen-_ivenment xxc000 Profit after tax sive income _sive income. ‘Associates 7) @) 140 Legal form Domicile US Faslesskitring 1s ‘Denmark McDonald's Marketing Coop Danmark A/S as Denmark “The Company operates signage in proximity to one of the Company's real estate investments. Deferred tax liabilities Deferred tax assets and lblities are attributable tothe aliowing Assets kK000 2018 2017 2018 Property, plant and equipment ° ° 168 682 Intangible assets ° ° 1063 Provsions (11922) (14.688) 0 other (278) (115) 0 ‘Tax (assets) / liabilities (2200) —(@a 804) 169745 Net of tax labities (assets) 12200 14.804 (12200) (Net tax (assets) / liabilities ° ° 157545, ‘Movement in net deferred tax during the year kK000 2018 Opening balance 158.980 Recognised in profit or loss (1435) 31 December 157 545 ‘Total movement (1435) ‘Trade and other receivables Kx000 2018 Trade receivables 52316 Deposits 7553 Prepayments 6.052 Other receivables 8852 ‘otal trade and other receivables 74773 2017 173594 190 0 0 ee (04804) 158980 2017 162.443 3463) 158 980 (3.463) 2017 56.360 7419 6.036 1873 71.688 Page 28‘Notes (continued) 14 Cash and cash equivalents Dkxco00 Cash and cash equivalents Total cash and cash equivalents Restricted cash Total restricted cash Share capital kxco00 ‘Share issued (thousands) On issue at 1 January Capital reduction (On issue at 31 December - fully paid xK000 ‘Alotted, called up and fully paid (Orcinary shares of DKK 500 each Total Shares classified as lablties ‘Shares classified in shareholders funds Total 2018 2017 o 45 546 o a5 546 o 52192 ° 52192 Ordinary shares 2018 2017 60 0 300000 507 817 0 (a7 817) 30.000 Ordinary shares 2018 2017 30 000 30 000 30.000 30.000 ° ° 30 000 30000 30.000 30.000 “The holders of ordinary shares are entitled to receive dividends as dedared from time to te and are entitled to one vote per share at meetings ofthe Company. ‘There were no change to the companys share capital composition during the year. No shareholder holds special rights, Dividends ‘The following dividends were recognised during the period: x00 DKK 633 and 1,500 (2017: 69 and 2,231) per qualifying ordinary share 2018 2017 128 000 203 858Notes (continued) 15 Other interest-bearing loans and borrowings ‘The Company has taken out bank loans against security inthe Company's owned land and properties. kK000 2018 2017 ‘Non-current other interest-bearing loans and borrowings, Secured bank loans 542719 __ $68 608 ‘Total non-current other interest-bearing loans and borrowings 542719 568608 Current other interest-bearing loans and borrowings Secured bank loans 25890 25365 ‘Total current other interest-bearing loans and borrowings 25365 Terms and debt repayment schedule Nominal Interest Year of carrying Currency rate ~=—=smaturity Face value amount kx000 21s 2018, Reaikredit Danmark kK. 1.78% 2037 585.497 $68 609 Total 585497 568 609 Other Interest-bearng loans and borrowings are measured at amotised cost and secured against the Group's portflio of owned lend and buldings. 16 Provisions Onerous «000 Dilapidation contract Total Balance at 1 January 2018 1451917748 32267 Provisions made during the year 687 ° 687 Provisions used during the year ° “a Provisions reverse during the year (2445) (11327) (13772) Unwinding of ciscounted amount 12 174 186 Bolance at 31 December 2018 12773 6548 19321 Non-current 12273 6548 18821 Current 500 0 500 Balance at 31 December 2018 12773 6548 19321 ‘The dlapdation provision relates tothe expected cost of restoring leased premises to the condition specified inthe lease documents on termination of these leases. These costs wil be incured on ext from the properties, and the amount that wll be payable is primarily dependent on negotiations with the individual lanclords on ext In 2018 the discount rate use to unwind the dlapidation reserve has been changed and the reversal impact on the income statement is equal to DKK 1,785 thousand, presented as Other Operating Income, net (see Note 2). ‘The onerous contract provision relates tothe expected cash losses on sub-franchise agreements where the expected direct costs ‘are greater than the expected income from the balance sheet date to the earliest date the contract can be terminated. Page 30Notes (continued) 17 Trade and other payables kK000 2018 2017 Trade payables 24309 19431 Depesits received 9439 9748 VAT 8 duties 8237 4233 Payroll related 12232 8245 ‘Other payables and accrued expenses 48477 52.698 ‘Total trade and other payables 102694 94335 18 Financial instruments ‘The Company uses various nancial instruments. These include loans, cash and various tems, such as trade recelvables and ‘rade payables that arse drecty from its operations. The main purpose ofthese financial instruments sto raise finance forthe Company’s operations ‘The main risks arising from the Compary's fnanclal instruments are credit risk’ lquldty rs forelgn exchange risk, and interest rate risk. The polices for managing each ofthese risks are summarised below. 18 (a) Falr values of financial instruments ‘The fair valve of all financial assets and lables by dass together with their carrying amounts shown inthe balance are. as follows: DkK000 2018 2017 Cash and cash equivalents ° 45546 Restricted cash 0 52192 Receivables from related parties 69.095 0 “Trade and other receivables 473 71.688 ‘Total financial assets at amortised cost 143868 __ 169 426 Financial assets used as hedging instruments ° ° Financial assets designated as far value through proft oo ° o Total financial assets 169 426 Other interest-bearing loans and borrowings. 593 973 ‘Trade and other payables 94.335 Payables to related partes 3.989 Provisions 32267 Total financial liabilities at amortised cost ma 36a Financial lables used as hedging instruments 0 o Financial ilies designated as far value through proftor loss © o ‘Total financial liabilities 724 564 Total net financial instruments (547530) _ (555138) ‘The fair value of nancial instruments is deemed to be materially equivalent tothe carrying value, except for othe interest- bearing loans and borrowings. The fair vale of other interest-bearing loans and borrowings for the Company is DKK 585,497 thousand, Page 31Notes (continued) 418 Financial instruments (cortnzod) 18 (a) Fair values of financial instruments (continues) ‘Fair value hierarchy ‘Al fnancal instruments measured at fair value use quoted prices (unadjusted) in active markets for identical assets or lables. As a result, no fair value hierarchy table is presented, Ifa table was presented, all nancial instruments measured at fair value would be classed as Level 2 ofthe far value hierarchy. ‘Effect of change of inputs used in fair valve measurement As the possibilty of quoted prices (unadjusted) in active markets for identical assets not being avalabe for these assets Is remote, no analysis ofthe effect of changing ane or more of te inputs use in far value measurement to another reasonably possible assumption has been prepared. 18 (b) Credit risk ‘nancial risk management Credit isk isthe rsk of financial loss to the Company If franchser or counterparty to 2 financial instrument falls to meet its ‘contractual obligations, The Companys principal financial assets are bank balances and trade receivables and the maximum ‘exposure to credit risk atthe balance sheet date is represented by the carrying value ofthese assets. ‘The creat risk associated with bank balances is imited as the counterparties have high credt ratings assigned by intemational cceditrating agencies. “The principal credit risk raises therefore from trade receivables, which represent outstanding fees receivable. In order to limit the tsk surrounding outstanding fees are reviewed on a regular basis in conjunction with debt ageing and collection history. ‘The Company also has @liited crest risk arising from trade receivables, which represent outstanding fees receivable. The risk Is limited due to short payment terms and no receivables being past due. The Company has not realised any cred losses in 2018, 18 (€) Liquidity risk Financial risk management “This liquity risk is managedby maintaining sufficient cash balances to meet working capital needs. Cashflow requirements are ‘monitored by shortterm and lang-term rling forecasts. In addition, the Company regulary reviews its postion in relation to all financial covenants in place in relation to both its external borowings and to McDona's. ‘The following are the contractual maturities of financial abilities, incuding estimated interest payments and excluding the effect of netting agreements: ‘31 December 2018 carrying Contractual © Lyearor = 1t<2 2008 vers eae kK000 ‘amount cashflows less ‘years: ‘years ve Non-derivative financial liabilities Secured bank loans 568609 772336 «= 46.267 «45.853 «134999 545.217 Payables to related parties 774 m7 74 0 ° 0 “Trade and other payables 102 694 o 0 0 Total 149735 45853 545.217 31 December 2017 Non-derivative financial liabilities ‘Secured bank loans 593973 81900946673 «46267125076 600993 Payables to related parties 3.989 3.989 3.989 ° o ° “Trade and other payables 94335 94335 94335. o o 0 Total 692297 __ 917333 125076 __600993 Page 3219 18 (4) Market risk Market risk - Foreign currency risk ‘The Company/s operations have no significant exposure to foreign currency risk at year end. AS a result, a senstivty analysis has not been presented forthe Company. Market risk - Interest rate risk ‘At the balance sheet date, the interest rate profile ofthe Company's interest bearing Fancal struments was: xxc000 2018 2017 Fixed rate instruments Financial assets ° ° Financial abies (568 609) __(593 973) Total fixed rate instruments (568609) _ (593973) Variable rate instruments Financial assets 68 635 45 546 Financial lbilties o_o Total variable rate instruments Senstinty anaiysis ‘A change of 100 basis points in interest over the year would have increased / decreased the result forthe year by DKK 686 thousand (2017: DKK 455 thousand). The analysis assumes that all ther variables, in particular foreign currency rats, remain constant and considers the effect of al financial instruments with variable interest rates. ‘The Company manages its capital to safeguard its abilty to operate as a going concern and to optimise returns to shareholders, ‘Overdraft and revolving credit facites will be used to finance the working capital cycle if required, ‘The capital structure of the Company consists of net debt, which includes the borrowings disclosed in note 15 after deducting ‘ash and cash equivalents, and equty attributable to the parent, comprising issued captal, reserves and retained earnings 2s disclosed in the statement of changes in equty ‘The debt and equity balances are subject to externaly imposed capital requirements, such as those imposed by third party loan Providers and McDonald's. The Group has been in compliance with these capital requirements during the yea. Operating leases “The Company primary eases properties for the purpose of operating a McDonalds restaurant. The intial lease term typically ‘uns fora petiod from S to 10 years, with an option to renew the lease after that date. Lease payments are renegotiated at that date to reflect market rentals. Some leases are based on a fed rate and some provice for addtional rent payments thet are based on changes in local price indies. NNon-cancelable operating lease rentals are payable as follows: kk000 2018 2017 Less than one year en. 3142 Between one and five years 56108 47933 More than five years 83518 29514 Total non-cancellable operating lease rentals 172297 108 868 During the year ended 31 December 2018, DKK 35,4 millon (2017: DKK 32,4 millon) was recognised as an expense in the income statement in respect of operating leases. Page 33Notes (continued) 20 Commitments Capital commitments During the year ended 31 December 2018, the Company entered into contracts to purchase property, plant and equipment for DKK 4,058 thousand (2017: DKK 6,220 thousand). OfFbalance sheet arrangements ‘The Company Is jointly and severally able with the co-owners of 1/S Fellessktring forthe partnershin's obligations. The total statement of nancial postion amounts to DKK 337 thousand at year end (2017: DKK 540 thousand). Other guarantees amount to DKK 7,649 thousand. 24. Contingencies ‘The Company i a guarantor for Food Folk Group Holdings AS, Food Folk Norge AS, Food Folk Suomi Oy and Food Folk Sverige [AB perform their obigations under creit agreement thatthe Food Fok Group Holdings AS group has entered into with a financial Institution, The guarantee includes customary Imitation that ensures that payments cannot exceed wat would normally be permitted distributed as dividends from the companies. The Food Folk Group Holdings AS group's total obligation amounts to EUR. 218.6 milion as of 31 December 20:8. “The Company is jointy taxed with Danish entities in Food Folk Group. The Company is unlimited jonby and severaly lable for Danish cocporation taxes and withholding taxes on dividends and interest under the joint taxation scheme. The jointly taxed ‘companies’ total net laity tothe Danish tax authors Is recognsed inthe nancial statements of Food Folk Danmark Holdings 'AGS. Any subsequent corrections ofthe taxable jointy taxed income or withholdings taxes, et, may ental an inease in the (Companys habit. 22. Related parties ‘Parent and ultimate controling party During 2017, the Company’s shares were acquired by Food Folk Danmark Holding ApS from McDonald's Corporation. AS 2 result, the new ultimate controling party of the Company is Guy Hands (the previous uate controfing party was McDonal's Inc) and MeDonald's Corporation isnot anymore a elated party. The next most senior parent which prepares consolidated financial statements is Food Fok Danmark Holding ApS. A copy ofthese financial statemens can be obtained from Falkoner Alé 20, 2000 Frederksberg, Denmark. ‘Key management personnel compensation ‘Compensation of the Company/s key management personnel includes salaries, non-cash benefits and contributions to post- ‘employment defined contribution plans. Other related party transactions Sale of Purchase of — Interest Interest seruces ovals seryces income -—=—expenses kK000 2018 2018 2018 2018 2018 Food Folk Group Holdings AS 2383 0 nar o (436) Food Folk Norge Holdings AS so 0 ° 0 ° Food Folk Holdings Danmark ApS 50 o ° 0 o Food Folk Holdings Suomi Oy 50 ° ° 0 o Food Fok Holdings Sverige AB 50 o ° ° 0 Food Folk Norge AS. 425 ° ° ° 0 Zero Five AS, 5B ° o ° 0 Food Folk Suomi Oy 2609 0 0 ° o Food Folk Sverige AB 1393 o (6751) 0 o Total (436) Page 34Notes (continued) 22, Related parties (ones) Loans Gash-poolng Receivables Payables payable Divtéends ‘bolances outstanding outstanding kxc000 2018 2018 2018, 2018 2018 Food Folk Group Hoidings AS ° 68 635 o my ° Food Folk Holdings Danmark ApS ° ° 0 0 (128.000) Food Falk Norge AS: ° o 70 ° ° Food Folx Suomi Oy ° 0 70 ° ° Food Fok Sverige AB 0 ° 321 o ° Total Sale of Purchaseot — Interest —nterest sernces Raves services “ncome —expensos kk000 2017 2017 2017 2017 2017 Food Folk Group Holdings AS. 551 © (4042) ° ° Food Folk Norge AS 0 ° ° Feed Folk Suomi Oy 0 ° ° Food Folk Sverige AB 0 ° ° MeDonale's Corporation 2 0 o Total DkK'000 2017 2017 2017 2017 2017 Food Folk Group Holdings AS ° ° 0 ou ° Food Folk Norge Holdings AS o o o 7 ° Food Folk Holdings Danmark ApS ° o o 0 (133.858) Food Folk Norge AS: ° 0 o 8 o Food Folk Suomi Oy ° ° ° 48 ° Food Folk Sverige AB ° ° o on ° McDonale's Corporation 0 ° o © 70.000) Total (3.989) _ (203 858) ‘All outstanding balances with these related partes are priced on an arm's length principle and are tobe settled in cash at the request ofthe related party. None ofthe balances are secured. 23 Subsequent events No events have occured after the balance sheet date that materially affect the financial position af the Company at 31 December 2018. Page 35Notes (continued) 24 Changes in labllities from financing activities Opening Non-cash Closing ex'000 balance Cashflows transactions balance Deb to rest institutions 568608 (26937) 1048 542719 Long-term liabilities 568608 (26937) ose 542719 Debt to creat institutions 25-365 0 525 25.890 Short-term liabilities 25.365 ° 525 25890 Liability from financing activities for 2018 593973 __ (26937) 1573 __ 568609 Page 36